Property and equipment

9 Months Ended

Sep. 30, 2020

Property, Plant and Equipment [Abstract]

The balance of property and equipment, net is as follows ($ in thousands):


	As of September 30,		As of December 31,
	2020		2019
Property and equipment, gross
Land, buildings and improvements	$	1,916,838	$	1,976,214
Fixtures and machinery (1)	84,913		81,437
Furniture and other fixed assets	231,627		228,533
Construction in progress	8,111		42,083
Total property and equipment, gross	2,241,489		2,328,267
Accumulated depreciation	(451,589)		(398,353)
Total property and equipment, net	$	1,789,900	$	1,929,914

________

(1) Includes the gross balance of our financing lease right-of-use asset of $2.3 million (see Note 11).

Depreciation expense for property and equipment was $68.6 million and $76.9 million for the nine months ended September 30, 2020 and 2019, respectively, and $21.9 million and $29.2 million for the three months ended September 30, 2020 and 2019, respectively.

For the nine months ended September 30, 2020 and 2019, $0 million and $8.6 million of interest expense was capitalized on qualifying assets, respectively. For the three months ended September 30, 2020 and 2019, $0 million and $3.6 million of interest expense was capitalized on qualifying assets, respectively. Interest expense was capitalized using the weighted-average interest rate of the debt.

Sale of assets

On May 22, 2020, we completed the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, which were reported within our Jamaica reportable segment, for $60.0 million in cash consideration. Upon classification as held for sale, we recorded an impairment loss of $25.3 million based on the sale price of the properties, which is considered an observable input other than quoted prices (Level 2) in the U.S. GAAP fair value hierarchy. The impairment is recorded within impairment loss in the Condensed Consolidated Statements of Operations. Upon closing, we received total cash consideration of $58.7 million, after customary closing costs, and recognized a $1.8 million loss within loss on sale of assets in the Condensed Consolidated Statements of Operations.

Consistent with the terms of our Existing Credit Agreement (as defined in Note 11), we expect that a portion of the net proceeds, after deducting incremental expenses and capital expenditures incurred across our portfolio for up to 24 months following the sale, will be used to prepay our Term Loan in the second quarter of 2022.

Assets held for sale

Subsequent to quarter end, we entered into an agreement to sell the Dreams Puerto Aventuras for total cash consideration of approximately $34.5 million. The sale is expected to close by the first quarter of 2021, however there is no assurance that we will complete the transaction. The Dreams Puerto Aventuras was classified as held for sale after September 30, 2020.

Lessor contracts

We rent certain real estate to third parties for office and retail space within our resorts. Our lessor contracts are considered operating leases and generally have a contractual term of one to three years. The following table presents our rental income for the three and nine months ended September 30, 2020 and 2019 ($ in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
Leases	2020		2019		2020		2019
Operating lease income (1)	$	254	$	1,215	$	1,400	$	3,931

________

(1) Our operating lease income, which is recorded within non-package revenue in the Condensed Consolidated Statements of Operations, includes variable lease revenue, which is typically calculated as a percentage of our tenant's net sales.